Let’s Build a Trading Exit Strategy
Most traders fail because they don’t have the exit strategies but they are maybe more important than entries.
Exit strategies for smart trading mean that you as a trader know where to stop losses and take the profit. Of course, you can’t do it randomly by setting stop-loss at 1%, 2%, 5%. Anyone who wants to become a trader must know the statistics: 90% of traders lose money when trading the stock market. Well, 10% make money all the time. Traders-Paradise’s aim is to show you how to trade smart, how to enter the elite club of 10%.
Everyone seeks to be in the 10% who make money, but the number of those who really want to devote is surprisingly small. You will need exit strategies for smart trading.
But there is a problem. Exiting a trade makes traders hesitant. We want to explain exit strategies, their importance, and give you a chance to make a profit, not a loss. In simple words, we’ll explain to you how to do “smart trading”.
Trading is easy but you need the know-how
Stop-loss (S/L) and take-profit (T/P) are the two main points that traders have to plan ahead when trading. Successful traders know there are several possible results in trade. They know that they can exit too early or too late and miss out on the profit. The other solution is to exit a trade at an accurate time which results in making money. We want you to look right there, to the point where you can exit your trade in profit.
Have you ever heard saying “let your profits run”? Well, some will run for a long time but some will fall on the start.
If you want to earn in trading stocks you have to do something that others don’t. You need an exit strategy established for each trade. This means you must have a trading plan.
Knowledge united with experience and effort to produce success
To make this clear, you will not find any consistently profitable trader who will tell you that relies on luck. Every successful trader has great knowledge, experience, and trading goals.
Some statistics tell us that learning to trade stocks requires two to five years of experience. Well, that’s hard work and commitment and there are no shortcuts. Don’t be worried or give up now! Trading stocks isn’t rocket science! The interesting thing with rookies is most of them seek for complicated solutions. Don’t let be seduced by gurus in the industry. The whole thing can be very simple.
The exit strategies for smart trading
One of the exit strategies for smart trading is to use targets to book partial profits. How does it work? Before you enter the position you have to define targets and when they come, take some part of your position off for profit. The portion of how much you’ll take off depends on your risk tolerance and trading plan. An experienced trader will take off 1/3 of their position or even half when the first target is scored.
This has several advantages. The stock market is volatile and stock prices are shifting direction quickly, so it is smart to book a part of the profit because you will not like to look at the market going against you. It is a bad experience and painful. So, try to avoid that. Well, when you take off some part of the profit, you will still have the other portion in the game. Smart enough? Anyway, this trading plan is simple. But there are plenty of other exit strategies for smart trading.
One of them is profit targets which means to identify the profit targets for the current cycle of stock. You would like to know where the price is possible to go. The point is to determine if you have to get out or stay in. But placing profit targets shouldn’t be randomly placed. So the most important feature you need is to check if your exit strategy is good. How can you do that – find HERE. This a game-changer. Check it out! Note, you shouldn’t place your profit targets too far away or too close.
Did you make your first stock trade? What are you doing now? Are you relaxing and waiting to become a billionaire? Don’t do that! Even if you see your stocks running higher there will be one or few starting to fall. What are you going to do now? You have to know that just one loser can ruin your whole capital.
The point is that the stock market is risky and all money that you invest in stock may end up in 100% loss. Of course, you shouldn’t stop investing and trading. So, just take some steps to ensure that you reduce your losses. There is a way to do it. If you place a stop-loss, you practically ensure that your losses do not exceed a specified amount. A stop-loss order means to sell a stock when it enters an established price or percentage. For example, you bought a stock for $100 and you don’t want to lose more than 7%. All you have to do is to place a stop-loss order at $93. If your stock drops below $93 your stock will be automatically sold. The other possibility is your stock is going up. So, let’s say, it trades at $160. That’s a very nice profit of $60 or 60%. What can you do? Just lock in profit at $130, for example, and set a stop order at the same amount.
A stop-loss strategy provides you to stay in the game. If you put a 4% stop on your trades, you will never lose more than 4%, for example. It is simple, yet many traders do not use it. Moreover, they don’t have an exit strategy. We have to say, that isn’t trading, that is gambling.
What stop loss percentage should you use? Some experts’ recommendation is 8%. At the moment you buy a stock, immediately put a stop-loss at the level you are willing to lose. Nothing less, nothing more. You can adjust your stop-loss order depending on the stock price direction.
Why exit strategies for smart trading?
Exit strategies boost assurance and profitability. Calculate reward and risk levels before entering a trade, find a strategy to exit the position at the most profitable price, no matter if you are taking a loss or a profit.
The traders caught the losses due to a lack of exit strategy from the trade before they entered the trade.
The majority just take the position in the stock market. Do they have any idea of where to exit the position? What to do if the stock moves in both beneficial or bad directions? A lot of traders ask for help after taking a position. Hence, you should never fall into that trap. You MUST have exit strategies for smart trading. Otherwise, you will lose your capital, home, family. Exit strategies bring discipline. It is important for every trader to take out the profit at the right time. Let us ask you something. Why are you trading stocks? To make money, of course. That’s why you are in the stock markets. Taking profits is the main goal, right? That is possible only and ONLY if you have an exit strategy.